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Billions in Estimated Medicare Advantage Payments From Chart Reviews Raise Concerns


We undertook this study because of concerns that Medicare Advantage organizations (MAOs) may use chart reviews to increase risk adjusted payments inappropriately. Unsupported risk adjusted payments are a major driver of improper payments in the Medicare Advantage (MA) program, which provided coverage to 20 million beneficiaries in 2018 at a cost of $210 billion. CMS risk-adjusts payments using beneficiaries' diagnoses to pay higher capitated payments to MAOs for sicker beneficiaries?which may create financial incentives for MAOs to make beneficiaries appear as sick as possible. MAOs report these diagnoses via CMS's MA encounter data system based on services and chart reviews (i.e., MAO's reviews of a beneficiary's medical record to identify diagnoses that a provider did not submit or submitted in error). For a diagnosis to be eligible for risk adjustment, it must be documented in a medical record as a result of a face to face visit. Although CMS requires MAOs to identify chart reviews in the encounter data, CMS does not require MAOs to link these chart reviews to a specific service associated with the diagnoses. This may provide MAOs opportunities to circumvent CMS' face-to-face requirement and inflate risk adjusted payments inappropriately.


We analyzed 2016 MA encounter data to determine the 2017 financial impact of diagnoses reported only on chart reviews and not on any service record in the encounter data that year. We also analyzed CMS's responses to a structured questionnaire to identify action taken by CMS to review the impact of chart reviews on MA payments.


Our findings highlight potential issues about the extent to which chart reviews are leveraged by MAOs and overseen by CMS. Based on our analysis of MA encounter data, we found that MAOs almost always used chart reviews as a tool to add, rather than to delete, diagnoses-over 99 percent of chart reviews in our review added diagnoses. In addition, diagnoses that MAOs reported only on chart reviews-and not on any service records-resulted in an estimated $6.7 billion in risk-adjusted payments for 2017. CMS based an estimated $2.7 billion in risk adjusted payments on chart review diagnoses that MAOs did not link to a specific service provided to the beneficiary-much less a face to-face visit. Although limited to a small number of beneficiaries, almost half of MAOs reviewed had payments from unlinked chart reviews where there was not a single record of a service being provided to the beneficiary in all of 2016. Our findings raise potential concerns about the completeness of payment data submitted to CMS, the validity of diagnoses on chart reviews, and the quality of care provided to beneficiaries.

Despite the potential for MAOs to misuse chart reviews, CMS has not reviewed the financial impact of chart reviews in the encounter data on risk adjusted payments. CMS also has not yet performed audits that validate diagnoses reported on chart reviews in the encounter data against beneficiaries' medical records. CMS reported that it plans to begin audits that would include such chart reviews later this year.


We recommend that CMS: (1) provide oversight of MAOs that had payments resulting from unlinked chart reviews for beneficiaries who had no service records in 2016, (2) conduct audits that validate diagnoses reported on chart reviews in the encounter data, and (3) reassess the risks and benefits of allowing unlinked chart reviews to be used as sources of diagnoses for risk adjustment. CMS concurred with these recommendations.